Reuters/London

There’s been a marked slowdown since autumn last year. China is looking a bit slower. Thailand and Malaysia have seen a bit of a slowdown
Sky-high oil prices are beginning to dent oil demand growth, the International Energy Agency said yesterday, but added prices could ultimately moderate through a global economic slowdown.
Its view echoed a report from the International Monetary Fund on Monday which said that oil prices and inflation were the key risks to the global recovery.
That had contributed to a 3% drop in oil prices on Monday, but Brent crude rose a dollar yesterday to over $125 a barrel as some analysts said the IEA report was less negative than expected
Few expected Opec oil producers to formally agree to pump more to bring prices down, the IEA said.
“That leaves a less palatable route to price moderation – namely economic slow-down and weaker demand growth,” it said in its monthly report.
“There are real risks however that a sustained, $100 per barrel plus price environment will prove incompatible with the currently expected pace of economic recovery.”
 The energy advisor to the Organisation for Economic Co-operation and Development (OECD) said data for January and February suggested that high oil prices may have started to dent demand growth.
 But it kept its 2011 global oil demand growth forecast unchanged at 1.4mn barrels per day (mbpd) or 1.6%.
“The IEA writes a lot about “signs of slowing demand” but has not really changed its forecast numbers; hence combined with its low estimate for Saudi production we view this report less negative than expected,” said Olivier Jakob from Petromatrix.
The head of the IEA’s oil industry and markets division David Fyfe said the agency had noticed slowing demand trends in the US and Asia Pacific.
“There’s been a marked slowdown since autumn last year. China is looking a bit slower. Thailand and Malaysia have seen a bit of a slowdown,” he said.
“We are quite early in the cycle, we have only been above $100 a barrel for the first quarter. We would expect sustained economic effect from prices to take 6 to 12 months to fed through,” he added.
He said that slower demand in some Asian countries could be offset by stronger demand from Japan which may have to ramp up its oil use by about 150,000 barrels per day to compensate for lost nuclear power generation after a devastating quake.
Fyfe also said that despite early signs of demand destruction because of high oil prices, it was too early to predict the end of the rally.
“It’s difficult to see where is the high water mark for political unrest. Arguably some of this uncertainty in the Mena (Middle East-North Africa) region has a while further to run,” he said.
The IEA said tight supply was a further concern. Global oil output fell by around 0.7mbpd in March to 88.27mn bpd due to civil war in Libya.
“Hypothetically, if global supply were to chug along at March levels for the rest of 2011, OECD inventory could slip to near five-year lows by December,” it said.
The IEA said Opec March production was 0.6mn bpd below what it sees as average demand for Opec oil in 2011.
However, the IEA said it believed Opec spare capacity stood at a comfortable level of 3.91mbpd, with Saudi Arabia accounting for 3.2mn alone, countering industry concerns Opec’s spare supply cushion was much smaller.
“The response from Opec to the loss of Libyan crude has been quite modest. We are still waiting to see much sign of a pickup in terms of rising Opec supplies,” said David Fyfe, head of IEA’s oil industry and markets division.
The IEA also said non-Opec output was up 0.2mbpd in March to 53.3mn despite unrest in Yemen, Oman and Ivory Coast and a strike in Gabon.
Opec meanwhile raised yesterday its growth forecast for world oil demand in 2011, expecting little impact from recent events in Japan and Libya.
World oil demand will now grow by 1.39mbpd, or 1.61%, to 87.94mbpd, the group said in its latest monthly report. In its previous report, Opec put this year’s average daily demand at 87.74mbpd.
For 2010, demand was put at 86.55mbpd – up 2mbpd – it said, revising its estimate upwards slightly on the back of higher-than-expected winter consumption.
An 80% cut in production in Libya due to the ongoing conflict – to just 250,000-300,000 bpd from a previous 1.6mbpd – was being compensated for by other Opec producers.
“Since the supply disruption in Libya, Opec Members have accommodated most of the shortfall in production, ensuring that the market is well supplied,” the organisation said.
“The market can be assured that in the months ahead, the Organisation will continue its longstanding role of supporting oil market stability,” Opec said.
Yesterday, Brent North Sea crude for delivery in May rose 48¢ to $124.46 a barrel in afternoon London trade.
New York’s main contract, light sweet crude for delivery in May, meanwhile fell 62¢ to $109.30.